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Southern New England Credit Grantors

Validation of Debt Requirements: Debt Collectors vs. Creditors

One of the biggest lessons you learn when studying the law is that the definition of everything matters, and you should not assume that you know what a term means. Take, for example, the validation of debts requirements under the Fair Debt Collection Practices Act (FDCPA) and Massachusetts regulations.

Under the Fair Debt Collection Practices Act, “debt collectors” are required to provide certain information to the consumer regarding the validation of the debts. The FDCPA defines who a “debt collector” is under its provisions. It expressly exempts any person who collects or attempts to collect a debt owed from being considered a “debt collector” if: 1) the debt was originated by such person, or 2) the debt was not in default at the time it was obtained by the person attempting to collect. (See 15 USC 1692a(6)(F)(ii) and (iii)). Mortgage lenders appear to fall within this exemption, as they either originate the loans they service or purchase loans which are not in default. Thus, mortgage lenders are not considered a “debt collector” under the provisions of the FDCPA.

Massachusetts has a similar debt validation requirement for debt collectors under Division of Banks regulations, 209 CMR 18.18. That too exempts “debt collectors” from including those who originated the debt and those who obtained the debt when it was not in default. (209 CMR 18.02.) So even though the regulation is under the Division of Banks’ regulations, by its definition mortgage lenders do not fall under the provisions of the regulation if they originate the debt or purchase debt not in default.

BUT there is another Massachusetts validation of debts requirement that comes under the Office of the Attorney General regulations of 940 CMR 7.08. It says that: “It shall constitute an unfair or deceptive act or practice for a creditor to fail to provide to a debtor or an attorney for a debtor the following within five business days after the initial communication with a debtor in connection with the collection of a debt…” It doesn’t fall under the Division of Banks regulations because it is much broader and encompasses creditors other than banks as well. “Creditor” is defined in 940 CMR 7.03 and it means “any person and his or her agents, servants, employees, or attorneys engaged in collecting a debt owed or alleged to be owed to him or her by a debtor and shall also include a buyer of delinquent debt who hires a third party or an attorney to collect such debt…” This is a much broader definition, and one which would encompass a mortgage lender servicing its own loan.

Now, this doesn’t mean that the validation of debts requirements themselves are all the same; they do share many similar requirements though. But just because two different terms may seem similar or mean similar things in common language, doesn’t mean that regulatory agencies or legislatures can’t redefine the terms to create the outcome they want.